Trying To Optimise Our 2 Manufacturing Plants In US To Mitigate Tariff Impact: Bharat Forge

Summary

In this interview, Mr. Baba Kalani, Chairman and Managing Director at Bat Forge, discusses the potential impact of President Trump's proposed 25% tariff on auto imports, stressing uncertainty until the full tariff details are revealed. He highlights that 20% of Bat Forge's exports to the US are in the auto sector and that they are working on ramping up production to mitigate risks. Additionally, Kalani talks about the company's significant defense contracts, particularly in artillery modernization, with an order book of around 10,000 crores. He remains optimistic about the future, particularly in defense, despite the ongoing trade negotiations.

Takeaways

• 😀 President Trump's 25% tariff on foreign-made cars has spooked the auto sector, creating uncertainty in the industry.
• 😀 Bat Forge's total export revenue includes a significant portion of automotive exports, with 20% of their exports directed to the US.
• 😀 The exact details of the tariffs on different auto products will be disclosed on April 2nd, making it difficult to assess the full impact at this time.
• 😀 Bat Forge is not concerned about any competitive disadvantage, as the tariffs will be applied uniformly to all international manufacturers.
• 😀 India’s government is currently negotiating with the US to potentially secure some relief on certain tariff lines, but clarity will only come after April 2nd.
• 😀 Bat Forge has already ramped up production of automotive components in the US to mitigate potential impacts from the new tariffs.
• 😀 Bat Forge's manufacturing capacity for passenger car components positions it to respond effectively to tariff challenges once more clarity is available.
• 😀 Bat Forge recently secured a large order worth ₹7,900 crores from the Ministry of Defence for artillery systems, with plans to execute it in three years, although they aim to complete it faster.
• 😀 The 4,000 artillery guns included in the order are part of a larger modernization program by the Indian Army worth approximately ₹70,000 crores.
• 😀 Bat Forge plans to participate in all categories and products related to the Indian Army’s defense needs, including artillery, light tanks, and tracked vehicles, expanding its role in defense manufacturing.
• 😀 Bat Forge's defense order book currently stands at ₹10,000 crores, with expectations for additional orders in the near future.

Q & A

What was President Trump's announcement regarding tariffs on cars?

President Trump announced a 25% tariff on all cars that are not made in the United States. This announcement caused concerns in the automotive sector.

What percentage of Bat Forge's total exports are related to autos?

Approximately 20% of Bat Forge's exports are related to automotive products, specifically exports to the United States.

How does Bat Forge view the impact of Trump's tariffs on its business?

Bat Forge does not expect the tariffs to have a major impact on the company. While the tariffs could cause some disturbance in the market, the company believes the impact on Indian companies, in particular, will be minimal.

What steps is Bat Forge taking to mitigate the impact of the tariffs?

Bat Forge is ramping up production of automotive components at its existing manufacturing plants in the United States. The company is also waiting for more clarity after April 2nd when the detailed tariff schedule will be released.

How does Bat Forge view the ongoing negotiations with the US trade department?

Bat Forge is hopeful that the ongoing negotiations may lead to some relief in certain tariff lines, which could benefit the company. However, it is waiting for more details and clarity.

What is Bat Forge's approach to diversifying its supply chains in the automotive sector?

Bat Forge acknowledges that switching supply sources in the automotive industry is a long-term process that can take 3-4 years. Hence, the company does not expect to make any quick switches but instead focuses on ramping up its current manufacturing capabilities.

What is the significance of Bat Forge's new defense contract with the Ministry of Defense?

Bat Forge has signed a significant defense contract worth approximately 7,900 crores for the supply of artillery systems. This contract is part of India's artillery modernization program, and Bat Forge expects to execute it over three years, with the potential to speed up production due to its large capacity.

How many artillery guns are included in the Indian Army's artillery modernization program?

The Indian Army's artillery modernization program includes the procurement of 4,000 artillery guns, which are expected to replace aging systems.

What is Bat Forge's role in the broader artillery modernization program?

Bat Forge is actively involved in the artillery modernization program and will bid for contracts in all categories, including light tanks and tracked vehicles, in addition to artillery systems.

What is the current value of Bat Forge's defense order book?

Bat Forge's defense order book currently stands at about 10,000 crores, which includes multiple defense-related contracts, including the large artillery contract.